What Happens if a Beneficiary Doesn’t Claim Life Insurance

December 1, 2023 | J. Price McNamara
What Happens if a Beneficiary Doesn’t Claim Life Insurance

A policyholder purchases life insurance to provide for loved ones after they are no longer here. They will pay premiums to a life insurance company in exchange for coverage and choose to buy a term life insurance policy or a permanent one. With either option, the life insurance provides a death benefit where the loved ones receive payment after the policyholder passes away.

The policyholder will name policy beneficiaries who will receive payment from the death benefit upon the policyholder’s passing. The policyholder will specify which percentage each beneficiary will get.

Since the life insurance policy has beneficiaries, the proceeds do not need to pass through probate. Instead, they are paid directly to the beneficiaries by the election made by the policyholder.

Generally, contact an experienced Life Insurance attorney if you have any issues with a life insurance claim or when you learn about a sizable unclaimed policy. An attorney can act against the insurance company or navigate the unclaimed property process.

The Importance of Claiming Life Insurance Benefits

Life insurance companies do not know when the policyholder passes away and will not automatically write the beneficiaries a check for the coverage amount. The beneficiaries must take action to claim the life insurance benefits. They must inform the life insurance company that the policyholder has died and provide acceptable proof.

The beneficiaries will never receive payment if they do not claim the life insurance benefits. The money can remain with the life insurance company for a certain period, but as you will see below, the life insurance company does not keep the money forever.

The Life Insurance Claims Process

You must file a claim before the life insurance company will pay the policy benefits, and each insurance company may have its own process and requirements. You will generally fill out a claim form and include a copy of the death certificate, and you can even call the life insurance agent who sold you the policy to help file the claim.

When you submit the claim, you will also determine how you want your money. Many people choose to take the benefits at once in a lump sum.

Insurance companies will review the paperwork once you file the life insurance claim, and it will generally take between two weeks and two months to pay out your claim. However, they may delay the payment if they have any questions or issues. For example, they may see the cause of death on the certificate and want to know more.

Reasons Beneficiaries Might Not Claim the Life Insurance Proceeds

Although waiting to file a life insurance claim is never good, sometimes people do not know about a policy. The policyholder may not have communicated the estate plan to the beneficiaries, or the person or people who knew of the policy may have passed away.

Some people may struggle to deal with the issues surrounding their loved one’s passing and may not want to acknowledge that their loved one died. Additionally, the actual claims process or the insurance company might intimidate them.

Other people cannot claim the benefits successfully. Insurance companies have to approve the claim before they write the check, and they may place obstacles in your way or even deny the claim. For example, the life insurance company may suspect the policyholder lied on the application by claiming they did not smoke.

Consequences of Not Claiming Life Insurance Proceeds

The general rule is that the state where the deceased person resided takes over unclaimed life insurance proceeds after a certain number of years. The exact number depends on the laws of the state. The money going to the state does not necessarily mean you lose the right to claim it forever; it just means you must go through a different procedure to access the money.

Generally, life insurance proceeds will go through the escheatment process. This term describes the legal process for assets transferred to the state. The transfer is temporary because the state can transfer the assets to the rightful owner if it finds them. Before that happens, you must prove you are the rightful owner.

Each state may have its own regulations on unclaimed life insurance, and you should consult an attorney in the relevant state to learn the laws and the process for claiming the property.

Common Challenges in the Claim Process

The life insurance claims process can be challenging for beneficiaries because the insurance company can make life harder for you. In addition, the beneficiaries may disagree during the process, especially when there is a large policy.

Disputes Among Beneficiaries

If someone expected to benefit from a life insurance policy but did not, they may initiate a legal challenge.

They may contest the named beneficiaries, similarly to how one might contest a will. For example, a challenge may arise if the insured changed beneficiaries close to the time they died but did not follow the correct procedures.

Similarly, one may file a contest if they believe that one beneficiary got disproportionate proceeds. A dispute can freeze the payout and delay the process, and beneficiary contests are expensive and drawn-out affairs. However, you may need to contest a policy or a challenge under certain circumstances.

Issues With Policy Documentation

Insurance companies may require more than a death certificate and request additional documentation if they have questions. If they do not have adequate documentation, they may deny the claim.

Problems with the Insurance Company

Insurance companies may want to investigate the claim further. Accordingly, they can delay payment or deny your claim entirely. When they do this, the insurance company must give a reason.

Some reasons for denial include:

  • The insurance company believes that the policyholder lied on their application
  • The policyholder died by suicide within the first two years of the life insurance policy
  • The insurance company believes that there is fraud
  • The insured died in the process of committing a crime
  • The policyholder was not current on their premiums at the time that they died

You have legal rights when the insurance company has wrongfully denied your claim. An insurance policy is a contract between the policyholder and the life insurance company.

If insurance companies refuse to pay the death benefit you deserve under the policy terms, they breach the contract, and you can then sue to force payment of the death benefit. If the insurance company acted in bad faith, they may owe you damages directly.

Always contact a lawyer when an insurance company denies your life insurance claim. An attorney will review your case and file a lawsuit against the insurance company.

Steps to Take When a Beneficiary Doesn’t Claim

Life Insurance Beneficiary

If the beneficiary does not claim the life insurance policy, you may only learn of the policy years later. You might find paperwork or hear of a life insurance policy anecdotally. Either way, you can gain possession of unclaimed life insurance benefits.

You can use any locator to search for unclaimed life insurance proceeds. For example, the National Association of Insurance Commissioners has a website where you can search for life insurance policies in the name of the deceased. You must enter their Social Security number to proceed with the search.

In addition, you can also search for unclaimed property with the state. Each state has a database that allows you to search for unclaimed property, including life insurance proceeds.

Notifying Beneficiaries

If the policy identifies multiple beneficiaries, they must receive notification to prevent future legal problems. If you locate the unclaimed life insurance policy, contact a beneficiary of the policy. If the state possesses the unclaimed property, they may have to file an individual claim.

There is no set deadline to claim life insurance benefits, and the insurance company does not have the right to refuse to pay the claim if you waited too long. However, the passage of time can make it more difficult for you to claim life insurance.

Theoretically, the insurance company may make your claim more difficult if you seek the policy’s proceeds years later. However, they cannot tell you they refuse to pay you because too much time has passed.

While you do not want to wait to claim life insurance, the insurance company will owe you interest based on the time since the policyholder died. Many insurance companies will promptly pay once they receive and review the necessary paperwork.

Beneficiaries Should Not Wait to Claim Life Insurance Benefits

Beneficiaries must take prompt steps to claim life insurance benefits. You never know when the insurance company will put barriers in your way that can make the process more difficult for you. Contact an attorney if a significant life insurance policy is at issue.

Your relative has purchased life insurance for your benefits and has spent considerable money throughout their lifetime to ensure you are provided for after they are gone. They will undoubtedly want you to claim the funds provided for by the policy sooner rather than later.

If you experience issues related to claiming life insurance or want to avoid them, contact an insurance claims attorney for legal advice or help.

In a worst-case scenario, you may need to take legal action against the insurance company if it refuses to pay a claim. You may also need a lawyer’s assistance if you make an untimely life insurance claim.

How a Life Insurance Attorney Can Help You Claim Benefits

Many people put off claiming benefits because they feel intimidated by the process and do not know how to proceed, especially during a time of loss.

When faced with difficulties in obtaining benefits, a life insurance attorney can play a crucial role in assisting you through the process and ensuring you never miss out on the benefits you deserve.

Life insurance attorneys can file a claim, submitting all necessary documentation accurately and promptly. They can gather the required evidence, such as death certificates and medical records, to support your claim.

Some additional ways they can help include:

Negotiating with Insurance Companies:

Life insurance attorneys are skilled negotiators who can engage with insurance companies on your behalf. Whether negotiating claim amounts or contesting denials, their experience can lead to more favorable outcomes for beneficiaries.

Appealing Denials

If you receive a claim denial, an attorney can investigate the reasons behind the denial. Whether it’s due to a policy lapse, alleged misrepresentation, or other factors, an attorney can assess the validity of the denial and explore avenues for challenging it.

Pursuing Bad Faith Claims

In cases where an insurance company acts in bad faith, deliberately delaying or denying valid claims, a life insurance attorney can pursue legal action. This may involve filing a bad-faith insurance claim to seek compensation beyond the policy benefits for the harm caused by the insurer’s actions.

If your case progresses to litigation, a life insurance attorney can provide effective legal representation. They understand the laws surrounding life insurance claims and can present a compelling case in court to secure the benefits you deserve.

In times of grief and financial strain, a knowledgeable life insurance attorney can alleviate the burden of navigating the claims process. Their experience, advocacy, and commitment to protecting your rights can make a significant difference in ensuring that you receive the life insurance benefits you deserve.

J. Price McNamara Author Image

J. Price McNamara


Losing my own brother, then my father and sister after long, disabling illnesses just a few months apart drove a career change for me. Before that experience, I never truly understood the place you’re in. I never understood the dramatic impact that receiving (or not receiving) the disability and life insurance benefits you paid for and counted on can have on your life especially when you need to focus on family and healing. What I experienced with my own family now drives the way I view my clients and my work, and I will never forget it!

Author's Bio